If this option is enabled, the deposit will be deducted from the final invoice. 

If the deposit is not deducted, the invoice you are trying to create is likely not the final invoice.

You can check this on the contract in the pricing tile:

If this checkbox is selected, the invoice you are about to create is the final invoice. 

An final invoice is only generated if the following conditions are met: 

• All resources listed on the contract have been checked in.
• If any items have been included, they have been taken back.